TheCorporateCounsel.net

I have to say that I never thought I would write three blogs in one day on the topic of XBRL, but if the Staff thinks it is important, I will do my part to get on board. And here is something that truly caught my eye from the SEC’s 2023 Semi-Annual Report to Congress on structured data disclosures:

Enforcement utilized risk-based data analytics to uncover potential accounting and disclosure irregularities caused by, among other things, earnings management practices. Machine-readable data enabled Enforcement staff to review the financial data of thousands of public issuers in order to detect indicia of earnings management or other types of financial misconduct. The initiative resulted in charges against six public companies and several related individuals for violations of the federal securities laws for engaging in certain practices that gave the appearance of meeting or exceeding consensus earnings-per-share (EPS) estimates.

I blogged about the latest of those cases back in February – and I pointed out that the SEC’s data analytics tools are now sensitive enough to flag potential “earnings management” situations even when the adjusted dollar amounts are small. That’s because of XBRL! Now that the SEC has a solid dataset in its toolbox, it is becoming easier for the Enforcement Division to detect and pursue accounting issues.

– Liz Dunshee